EPPP - No Profit for Young Men

So on Friday another young and talented Blade left the club and was thus the cue for much gnashing of teeth, shaking of heads and barely hidden frustration at how it has happened again.

 
Ask any Blades fan and they will tell you that Matt Lowton is the latest example of the club selling off its prized asses, going way back to the late 60's and Mick Jones leaving for Leeds. A text from my Dad on Friday night only just fell short of listing them all but included the line;

"We are just an academy supply line for other clubs, it pisses me off!" 

Yet the modern day reality is that this situation will only get worse and the rewards from doing it will only diminish.

 

Again, whenever these sales occur, phrases like "lack of ambition" are bandied around and the board and Chairman are targeted for some stick. There is a belief that we are the only club operating in this way, yet if clubs such as Arsenal cannot hold on to their best players, what chance a League One club? Because, regardless of size, crowds, history, that is what we are. Yes, Tottenham held on to Luka Modric when everything pointed to him leaving for Chelsea or elsewhere, but a strong financial position and the possibility of success and trophies helps.  

 

And when a Premier League team come a knocking you either accept a price or keep an unhappy player. We all know the one at work, who is desperate to leave but for whatever reason can't. Whinging, whining, dragging everyone else down. Should we expect it to be any different at a football club? Especially when the aforememtioned employee was a key to the club's recent relative success and reportedly expressed a desire to play at a higher level.

Whilst there are clear financial benefits to the club from selling Lowton, the move doesn't massively help with the most pressing financial issue (assuming we are not facing cash flow issues) and that is the wage cap we are struggling to meet. I cannot believe that Lowton, who only broke into the team 18 months ago, is a high earner and so his saving is going to be small beer given the savings required. It is not as if the income from the sale hits top line turnover. Instead it is recognised as a profit on player registrations below operating profit, or in our case operating loss. £12.9m of loss in the 12 months to 2011 in case you were wondering. 

So what it does give is help in managing the books. Too few clubs operate in a sustainable manner and despite pledges from Kevin McCabe that this is his aim for United, I think he is finding it a much longer road than he anticipated. Trevor Birch, a man brought in on the equivalent of a high League One player's salary to manage this transition, lasted 18 months and departed with a £0.5m pay off for achieving very little. Certainly another season of third tier football will not accelerate that transition

Other sales are bound to follow. There is a need to reduce the wage bill and senior players may be offered for low fees to try and negate the deterrent that their wages generate. That will help with the salary cap. The younger players offer little savings in wages but generate pure profit and help plug the gap between costs and income. But how much longer can clubs guarantee that the gap will be plugged in this way?

Will the introduction of the Elite Player Performance Plan (EPPP) mean that the next generation of players such as Kyle Naughton, Kyle Walker, Jordan Slew and Lowton are gone before they make their first team debuts? Before they can make their names? Before they can generate anything between £10-£15m of transfer fees? The imposition of EPPP on the Football League, was an act of sporting coercion and blackmail that only the current machinations of the SFA and SPL can possibly emulate or outdo.

 

The blackmail arising from the Premier League threat to withold the £5m that it is due to pay the clubs of the Football League to help cover the cost of funding youth development until it voted in favour of the decision. This now remains in place for four years, but the ultimate pricepaid in return is much more.

The geographical limitations which prevented clubs from signing players from a radius greater than ninety minutes’ journey from their own ground are removed; creating a “free” market in which clubs take players on from anywhere. Alongside this the amount of money that they will have to pay in compensation has been drastically cut and is now determined by a fixed tariff card.

 

Compensation  levels are set dependent on how long the player has been at the selling club. For example, the fee is fixed at £3,000-per-year for a player's development from nine to 11-years-old. The fee from 12 to 16 is dependent on a club's academy status and range from £12,500 to £40,000.

Academies apply for a status based on criteria including financial investment in the academy. The status levels are from 1 to 4, with 1 being the highest. The academies are then audited by an independent body who will set the status for each club. The financial impact both in terms of running costs and funding is not insubstantial, the funding gap is £300,000 between Category One and  Category Two status and £270,000 between  Category Two and Category Three.

 

You would assume given the infrastructure and success of the academy at Shirecliffe that United have a high ranking status. Yet the reality is that it will probably be just Premier League clubs and a handful of Championship clubs that will go for Level 1. I assume United will be one of few teams outside of the Championship to apply for Level 2 status. It would be interesting to know what United applied for, as far as I can see it is something the club has never made public. Neither has the club made public how they voted on accepting EPPP, but with such a well developed, well-run and successful academy I can only hope that we took a principled stand, however futile. 

So what does this all mean for a club like United? Well, it is more than likely that clubs will scout younger players much more aggressively than previously. The fees for acquiring players in their mid-teens will be rarely above £100,000 and thus represent a minor gamble for clubs. The fear has to be that this leads to stockpiling - why not recruit 10 or 15 and see who make the grade and it will cost less up front than a Tom Taiwo or a John Bostock have cost Chelsea and Spurs in the past.

The Premier League argues the add-on amounts the selling club will receive if the player is a success at his new club will ensure it is a fair system. That is a fair point, for every Kyle Walker at United there has been a Lee Morris (£4m to Derby County) or a Wayne Quinn. Granted these moved later in their careers when established in the first team, however they highlight the gamble in investing heavily in young talent.

The danger is, with a focus on the elite,  how many players will actually trigger the add-on payments? A player is picked up for peanuts, doesn't make the breakthrough and left for the smaller clubs to pick back up, probably having not developed as well as they might have in the care of their original club. So yes they may find their way back to United and other non-Premier League clubs, but are "damaged goods" rather than how they might have develop

 

With the pick of the next generation of Blades stars likely to be plucked from Shirecliffe, long before they reach the Bramall Lane turf, and with little financial benefit to the club, it will be interesting to see how United manage the academy and their player relationships going forward. It will be as much about focusing on pastoral care for the player and closer communication and relationships with families and agents as purefootball development. Assuring them that the player's best interests are served staying with United.

The belief that "United always sell their best young players" is  something that will probably never go away as I can only see it becoming a more frequent occurrence but with much smaller rewards from doing it. For now, when the opportunity arises, with the club in the financial position it is in and in the league it is in, I can only see them selling. The sale may be unpalatable, the valuation on the player may be unpalatable, but it will be one of the few opportunities a smaller club has to realise profit on a player sale. This profit is a financial boost that makes a significant difference to both a club's solvency and profitability, soon that income stream will become a trickle.
 

It would be fascinating to hear the club's view on this, although little has been said since the announcement, apart from Academy boss John Pemberton expressing his disappointment about the position the club finds itself in regarding EPPP on a local radio phone-in. So here is an open invite to those in senior positions at Bramall Lane. Tell us how the club anticipate dealing with the imposition of the EPPP, what it means for our academy and the impact it will have on the club's finances going forward. I will be happy to post the results of any interview on here.